UPS Profit Forecast for Year Tops Estimates as Shipping Demand Increases

United Parcel Service Inc. (UPS), the world’s largest package-delivery company, forecast a 2012 profit that exceeded analysts’ estimates as shipping demand increases.

Annual earnings, excluding some items, will be in the range of $4.75 to $5 a share, the Atlanta-based company said today in a statement. That topped the average estimate of $4.78 in a Bloomberg survey of 25 analysts.

UPS benefited from a surge in holiday shipping, carrying 480 million packages in the peak season from Thanksgiving to Christmas as its quarterly total reached 1.13 billion. UPS also raised prices and is expanding its hub in Cologne, Germany, as it takes advantage of emerging-market demand.

Asian economic growth will still “outpace the rest of the world” even as the pace slows in some parts of the continent, Chief Executive Officer Scott Davis told analysts and investors on a conference call. “We’re guarded right now” on the outlook for the region, he said.

The U.S. economy is “better than we would have thought back in August and September” when there was talk of a second recession, Davis said.

“We don’t hear that anymore,” he said. “The U.S., while I wouldn’t call it a robust economy, small package is performing better than we would have thought four or five months ago.”

Stock Gain Reversed

The stock reversed earlier gains, falling less than 1 percent to $75.65 at the close in New York trading as broader U.S. indexes dropped. The shares had touched $76.93, the highest intraday price in 11 months.

Fourth-quarter revenue rose 5.6 percent to $14.17 billion, which missed the $14.45 billion average estimate of 17 analysts surveyed by Bloomberg.

Profit excluding the effect of pension expenses rose 17 percent to $1.25 billion, or $1.28 a share, from $1.07 billion, or $1.06, a year earlier. That compared with the average analyst estimate of $1.26 a share.

For 2012, UPS forecast domestic volume gains of 2 percent to 3 percent, while international domestic volumes will be little changed and international exports will rise 5 percent to 6 percent.

Asia package capacity has been reduced by about 10 percent since the third quarter by trimming flight frequencies in “numerous locations” in the region, Chief Financial Officer Kurt Kuehn said today in a telephone interview. He declined to say how many flights were cut in each city.

‘Major Focus’

“In some cases, we maybe took a flight down and rerouted the volume. The major focus was Asia-U.S.,” he said. “It didn’t change service levels. Just frequencies.”

Today’s quarterly results reflected the effect of a change in pension accounting that UPS said last week would increase adjusted earnings by 3 cents a share. The company took a pretax $827 million charge in 2011 as it accounted for pension gains and losses in the year incurred rather than amortizing them.

Volume rose last quarter for all product offerings except next-day air, which slid 1 percent, UPS said. Domestic deferred express shipments jumped 12 percent and ground shipping climbed 3.5 percent, while international volume increased 2.6 percent.

UPS charged more for each piece in all categories, with average prices rising 2.9 percent to $10.31 a package.

Holiday shipping exceeded expectations by surpassing 25 million packages on five different days, including two days that topped 27 million, UPS said.

FedEx Corp. (FDX), operator of the world’s biggest cargo airline, last month reported fiscal second-quarter profit that beat estimates as U.S. consumers increased holiday orders from online retailers.

To contact the reporters on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net; Natalie Doss in New York at ndoss@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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